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percentage of options that expire worthless

Myths and Misconceptions about Covered Call Writing

There are certain fallacies and deceptions associated with covered call writing as there are with all investment strategies. I am the first to say that there is no one strategy right for every single investor. We must master the pros and cons of each strategy to determine if it is right for our families. This [...]

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Factors that impact option pricing

Calculating the Greeks Using an Options Calculator

The Greeks are a mathematical means of estimating the risk of stock options. Delta measures the change in the option price due to a change in the stock price, Gamma measures the change in the option delta due to a change in the stock price, Theta measures the change in the option price due to [...]

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put and call option pricing

Put-Call Parity and Synthetic Trades: Understanding Option Pricing

When we sell covered calls or cash-secured puts we understand the factors that go into the premiums we receive: The option’s exercise price The current price of the underlying The risk-free interest rate over the life of the option Dividends, when applicable The amount of time remaining until expiration The volatility of the underlying It [...]

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covered call writing and put-selling with weekls

How To Use Weekly Options To Avoid Earnings Reports

In the BCI methodology, we never sell a covered call or cash-secured put on a stock with a projected earnings report date prior to contract expiration. When selling our traditional monthly options this means we are only able to use a particular stock for eight months of the year because most companies report earnings on [...]

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Ask Alan

Ask Alan 114 “Rolling Up in the Same Contract Month”

Alan answers a question posed by Seth, who asks: ” I purchased BWLD on 11/12 for $144.53 and sold the Dec. $145.00 call for $4.70. The stock climbed up and after one week I bought back the option for $7.40 as BWLD traded at $150.00. I still liked the stock so I sold the Dec. [...]

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Put-selling on ETFs

Using Puts and SelectSector SPDRs to Create an Ultra-Conservative Option-Selling Strategy

Selling out-of-the-money puts and using top-performing SelectSector SPDRs can be combined to design an extremely defensive option-selling strategy in a volatile market environment like we are currently experiencing. Using Inverse Exchange-traded Funds is another approach. In this article, we will discuss the former strategy,.  When we sell an out-of-the-money cash-secured put we are agreeing to [...]

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VIX options to hedge an portfolio

VIX Volatility Options: A Place In Our Covered Call Writing Portfolio?

Option returns play a major role in our covered call writing and put-selling strategies. Mega-returns can be quite enticing but also very dangerous. Recently, with market volatility rising exponentially in response to global-economic concerns, a few of our members have inquired about using volatility options ($VIX) based on the S&P 500 volatility as a means [...]

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Percentage Of Options Expiring Worthless: Debunking A Myth

“Selling covered call options and cash-secured puts is a smarter strategy than buying options because 90% of options expire worthless“. We’ve all heard this argument but never from me because it is simply not accurate. The reason so many venues present this statement as truth is because only 10% of option contracts are exercised. That is true. [...]

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Emergency Management Report: Dealing with Volatile and Bearish Markets:Re-Publication

I am re-publishing this article due to the extreme nature of market behavior this week, something we have come to experience periodically. It is important to re-act non-emotionally until our market stabilizes which it always does. Over the weekend I will also publish the blog article I have been working on this week. Stay calm! [...]

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short interest and covered call writing

Short Interest Explained

Covered call writers and put-sellers are always looking for metrics to improve trading results. Recently, we have had several inquiries about adding short-interest to the screening process. Over the years we have enhanced our Premium Member Stock and ETF Reports based on feedback we have received from you, our members. For example, we added ex-dividend [...]

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